Alphabet’s Pullback Just Opened a Window for Smart Investors

Key Points

• Alphabet, Google's parent company, hit an all-time high in February after a 40% rally but has pulled back 10% in recent weeks. 
• Despite a miss in their recent earnings report, there was solid growth across the board.
• Analysts remain bullish, with price targets implying nearly 25% upside.

After a stunning 40% run since September, Alphabet Inc. NASDAQ: GOOGL hit an all-time high in early February before experiencing a post-earnings pullback. The 10% decline in recent weeks may have shaken some investors, but this could be a golden buying opportunity for those paying attention.

While the earnings report contained a revenue miss that spooked the market, it's worth remembering that Alphabet still posted record-breaking revenue, driven by a 30% surge in Google Cloud growth. Combine that with the stock approaching oversold levels and a continuing wave of almost universal bullish analyst support, and the argument for stepping in at current levels becomes hard to ignore.

Alphabet’s Earnings Reveal Strength Beyond the Headline Revenue Miss

Alphabet's February earnings report may have been overshadowed by its revenue miss, but a closer look reveals plenty of reasons to stay bullish. While total revenue came in slightly below expectations, it still hit a record, driven by strong ad revenue and accelerating cloud growth, the latter helping to reaffirm the company's role as the market leader in the space.   

CEO Sundar Pichai wasn't slow about emphasizing the momentum behind Alphabet's AI initiatives, which are expected to drive even greater revenue expansion in 2025 and beyond. Despite the market's initial reaction, this solid quarter highlighted Alphabet's ability to scale its most important business segments.

Alphabet’s Long-Term Trajectory Remains Strong, According to Analysts

While the stock's subsequent drop suggested investors were rattled by the revenue miss, Wall Street's biggest names remain exceedingly bullish.

For example, Piper Sandler, JPMorgan Chase, and Citigroup all reiterated their bullish ratings in the aftermath of the report, with price targets ranging as high as $229. From where Alphabet closed last week, that implies nearly 25% upside from current levels.

For those wondering whether this pullback is a buying opportunity or a warning sign, analysts seem to be answering loud and clear: Alphabet's long-term trajectory remains firmly intact.

Confidence Remains, But Analysts Are Watching Growth Trajectory Closely

It has to be noted that the team over at DZ Bank stood out among the analysts covering Alphabet, as they actually downgraded the stock from Buy to Hold in the aftermath of the report. The revenue miss undoubtedly raised some concerns about Alphabet's near-term growth stability. Although Google Cloud's impressive expansion is helping to offset this, the DZ Bank team is waiting to see whether Alphabet can reaccelerate revenue growth in the coming quarters before turning more aggressively bullish. However, their refreshed $198 price target still suggests the stock is undervalued at its current levels.

Additionally, while analysts remain confident, some have trimmed their price targets, suggesting that valuation concerns are creeping in. A P/E ratio that remains above some of its tech peers means Alphabet needs to maintain strong earnings growth to justify its premium valuation.

One of the Best Buying Opportunities in Months?

From a technical perspective, Alphabet's current setup is highly attractive. The stock's RSI sits at 42, signaling that it is verging on oversold territory, a level that often precedes a rebound.

The recent decline has also started to run out of steam, with shares continuing to see gains since last week's low on Wednesday.  If momentum continues to build in the coming sessions, especially with bullish analyst support and strong underlying fundamentals, Alphabet could easily mount a recovery rally back toward its February highs.

For those waiting for the right moment to get involved, this dip could be one of the better entry points investors have seen in months. If the broader tech market remains strong, it wouldn't be surprising to see Alphabet back above $200 in the near future.